March 12, 2018

I’m frequently asked what it takes to run a hedge fund. Translation: “If a dope like you can run one, I certainly can too.” Fair enough. A lot of hedge funds are getting killed in a huge upmarket: Brevan Howard’s Master Fund shrank 5.4% in 2017, while David Einhorn’s Greenlight was down 12% in the first two months of 2018. It’s time for a new batch of fund managers. Think you can do better?

First, let’s see if you’re up to it. Right now, go out and buy a 60-inch flat-screen TV. Easy, right? As soon as it arrives, return it for a 75-inch model. Then, when that shows up, return it and get the 42-inch version. Still having fun? It’s a royal pain. As soon as you’re comfortable with something, it’s probably time to sell it. This self-qualifying exercise will show if you can turn on a dime when, say, tariffs tank the economy.

Next, visit all the people you know and ask them to take out their wallets and give you a slug of their money. Do the same for a bunch of strangers, too. Then promise that you’ll return triple the money in a decade, minus your modest 20% of the upside fees.

Ready to invest? What’s your style, your edge? Macro, distressed debt, long-short, dollar-event-driven, cryptocurrency arbitrage? Actually, there’s only one way to invest, especially in today’s environment. It works for everyone, from $20 billion hedge funds to individual retirement accounts worth a few thousand bucks: Take the pulse of the market and figure out how everyone is wrong.

Easier said than done. It isn’t hard to get caught up in the emotion of the market. It’s euphoria when stocks are booming and you’re getting crypto tips from Uber drivers—and despair when everyone is dumping stocks and swearing never to own them ever again. You’ve got to zig when everyone else zags. “Serpentine, Shel, serpentine!”

How do you know what’s right? It almost always feels wrong. There’s an old saying on Wall Street: “Your hand should be shaking when you place your order.” You can learn from George Costanza of “Seinfeld.”

February 26, 2018

I have a suspicion that Stephen Curry and Elon Musk are the same person. First, as was said of Michael Jackson and Diana Ross, you never see them in the same room together. More important, they both dislike crowded spaces.

Mr. Curry, a two-time NBA most valuable player with the Golden State Warriors, has mastered the art and science of shooting 3-pointers. But a closer look at his stats reveals that he really likes to shoot uncontested 3s. Who wouldn’t? Making uncontested baskets is a lot easier.

Mr. Curry often takes shots from several feet behind the 3-point line. Defenders, figuring no one would be stupid enough to shoot from that far away, leave him open. And he makes baskets with surprising accuracy. At one point in 2016, he made 35 out of 52 shots from between 28 and 50 feet. Uncontested indeed.

Elon Musk’s business strategy isn’t so different: Go far enough into the future that there are no other competitors. Mr. Musk’s first success was X.com, an email payment company. It merged with Peter Thiel’s Confinity to form PayPal —and avoid competition. They had the market to themselves for a long time because fraud, especially from Eastern Europe, was so rampant on early internet payment platforms. They solved the fraud problem and enjoyed an uncontested market, eventually selling for $1.5 billion to eBay.

Then Mr. Musk headed further into the future. He took the nine-figure payout from PayPal and pushed ahead with SpaceX, Tesla and Solar City. Literally his last $20 million went to Tesla in 2008. “I was tapped out. I had to borrow money for rent after that,” he later recalled. Private space launches, electric cars and rooftop-solar financing were all huge Muskian pushes into the future, where no one else dared play. Today, Tesla is worth around $60 billion. SpaceX raised money last summer at a $21 billion valuation. Mr. Musk is no longer borrowing to pay his rent.

Quite impressive, even though I find all the handouts offensive. When I see someone driving a Tesla I greet him with, “You’re welcome.” When he inevitably asks for what, I roll out the long list of subsidies: a $465 million Energy Department loan in 2009, a $7,500-a-car income-tax credit from the feds, $1.3 billion in incentives from Nevada for a factory, and more. Removing competition by racing to the future is one thing. Seeking special treatment to boost your advantage is cheating.

February 05, 2018

I have a confession: The day I started on Wall Street, my boss handed me a yellowing copy of Benjamin Graham and David Dodd’s 1934 book, “Security Analysis.” He told me Warren Buffett swears by it! I read maybe three pages before the section on valuing railroad bonds put me to sleep. I still have the book, which is now a doorstop. What I quickly realized was that only three things matter when investing in technology: growth, growth and growth.

Last week Facebook announced that its quarterly earnings grew 61% year over year, amazing for a company with $40 billion in revenue. The stock is up a similar amount since the start of 2017, but some cracks are showing in user engagement and growth. Is Facebook really worth $553 billion? Has it peaked?

The company certainly is under fire. Too many people falsely believe that fake news on Facebook got Donald Trump elected. Like cockroaches, critics calling for regulation are scurrying out of the woodwork. Salesforce CEO Marc Benioff thinks Facebook is so addictive that it should be controlled like cigarettes. George Soros told the Davos crowd that Facebook and Google are a “menace, and it falls to the regulatory authorities to protect society against them.”

Some critics even think Facebook is too successful and should be broken up, though the Federal Trade Commission would have to search far and wide to find consumer harm. Now there is a call, led by News Corp ’s Rupert Murdoch, for Facebook to pay publishers like this newspaper for their content. (News Corp is the parent company of Dow Jones, which publishes The Wall Street Journal.)

Under pressure last month, founder Mark Zuckerberg announced changes to Facebook’s “news feed” that would emphasize posts from family and friends rather than outside publishers. Considered as a business proposition, this is a loser. Will more of grandma’s fruitcake recipes keep Facebook users clicking? It almost answers itself. “In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day,” Mr. Zuckerberg said last week. Yet investors yawned, and the stock rose 4%.

The company’s biggest threat is simple: Facebook is running out of people. In March 2007, when I sat down with Mr. Zuckerberg for a Journal interview, he bragged about having 16 million users. In its early years, Facebook was limited to college students, and critics suggested he would soon run out of them. They were right! Which is why the requirement to have an email address ending in .edu was soon dropped. Today 2.14 billion people use Facebook at least once a month.

Chew on these numbers: There are about 3.5 billion internet users today—less than half of the world’s population. It might seem like that leaves plenty of room for growth, except that about 750 million internet users are in China, where Facebook is blocked. Another 110 million or so are in Russia, where most use the homegrown social network VKontakte. That leaves Facebook with only a few hundred million potential recruits, mostly in India, Japan and Africa. Its reach is amazing, but this doesn’t leave much room to grow. In the lucrative U.S. and Europe, user growth is basically flat.

January 22, 2018

Wall Street considers it a truism that money sloshes around the globe seeking the highest return. But there are countless investors, believe it or not, who are willing to accept lower returns. P.T. Barnum supposedly said there’s a sucker born every minute. Many of them go into so-called socially responsible investing. Laurence Fink of BlackRock, which manages $6 trillion in assets, is only the latest to evangelize this fad. But the basic idea is to throw money away. In reality there is no trade-off of Vice vs. Nice. There are only returns.

“Corporate social responsibility” fails under the same halo. Reread Milton Friedman’s 1970 article “The Social Responsibility of Business Is to Increase Its Profits.” For stockholders to push their view of social responsibility, Friedman wrote, is simply to force others “to contribute against their will to ‘social’ causes favored by the activists.”

Profits are the best measure of a business’s value to consumers—and to society. No one holds a gun to the customer’s head. If the buyer weren’t glad to pay the free-market price, he would make the product or perform the service himself. Yet this idea is questioned all the time.

A case in point is Amazon, currently worth $625 billion based on expectations for Amazon-size profits to come. A Seattle Times headline in 2012 lamented that the company was “a virtual no-show in hometown philanthropy.” Sally Jewell of the retailer REI told the newspaper: “I’m not aware of what Amazon does in the community.” Really? Besides offer low prices, huge variety and quick delivery, along with jobs not only in Seattle but around the world, as manufacturers leverage Amazon’s platform to reach global customers? But the company didn’t sponsor concerts in the park! Gimme a break.

A counterexample is Etsy, which for years proudly touted that it was a “B Corp,” one “certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance.” Sounds a bit wishy-washy, but maybe it was supposed to attract social-impact investors. How’s it going? After Etsy went public in 2015, it opened at $31 a share, bottomed out in 2016 around $7, and now trades at $19. That’s worse than dead money, given that the overall market is up a third since Etsy’s IPO. Little surprise, Etsy is no longer interested in being a B Corp.

January 08, 2018

Get ready for the Unicorn Jailbreak. Tech stocks have taken off this year like a bat out of hell. But several hundred startups valued at over $1 billion, so-called unicorns, are watching with envy. Sure, 57 startups became unicorns in 2017, according to Recode. Their valuations are rising with venture-capital money, but what’s the fun in that? Liquidity is where it’s at.

This market is dominated by investors suffering from split personality disorder, rotating between risk-on and risk-off modes. Risk off means uncertainty and caution—and investors avoid risk like they’re retiring next week. Today the market is definitely risk on. Heck, the Cboe Volatility Index, or “fear gauge,” briefly hit an all-time low last week.

It’s time for the whole blessing of unicorns—look it up—to break out, hit the public markets and trade every day like real companies. Spotify has done a confidential filing for a direct listing on the New York Stock Exchange. It’s a great start, but others will need a bigger splash.

I’ve rarely seen a frothier market. Fed-driven low interest rates mean investors are begging for things to buy. They’re chasing mirages like cryptocurrencies and initial coin offerings. Calpers just raised its equity allocation, more as a magic wand to stave off municipalities actually kicking in more dough. But no matter, they need stock. As they say on Wall Street, when the ducks are quacking, feed them.

Where are all the IPOs? One problem is that SoftBank’s $93 billion Vision Fund is bagging unicorns like Teddy Roosevelt shooting wild buffalo from his train. It put $4.4 billion into office-space provider WeWork, $2.5 billion into the Indian online retailer Flipkart, and $1 billion into Fanatics, which sells football jerseys. And don’t forget the $7 billion it just invested in Uber, shrinking the ride-sharing giant’s valuation to $45 billion from $68 billion at the previous round. Only public markets can judge whether these valuations are right. For now, it’s shoot and wish.

December 18, 2017

It’s that time again: Get ready for lists of year-end predictions. My prediction? You hate them. Me too. The old game on Wall Street and Silicon Valley is for members of the bloviating class to polish their crystal balls and tout their brilliance by predicting how the next 12 months will unfold.

The worst predictors are those who hedge. They produce lists of worthless predictions that can be considered correct no matter what happens. You know them: “Unless there are exogenous economic shocks, stocks will rise next year.” Or, “Outside of OPEC intervention or tight supplies, oil prices are headed down.” Then a year later, these prognosticators will claim their predictions are uncannily correct, while they roll out new hedged mush for the next year.

I want in on this game too. Here are mine:

Interest rates will go up in 2018. I’m already 1-0.

The stock market will underperform 2017’s returns. See what I did there? Stocks are up around 24% this year. Even if they are up again by 23.99%, I’m right.

Tesla will miss production forecasts again. This is easy. Put another correct prediction in the book for me.

Bitcoin appreciation will slow. The cryptocurrency is up around 1,700% this year. Again in 2018? Store canned goods if it does. Cryptobulls claim bitcoin is a store of value, and to handle the world economy, it must be valued in the trillions. That’s a leap of faith wider than the Grand Canyon. Currencies were once backed by gold but now derive value from faith in governments and their ability to tax citizens and boost the economy. This became evident during the 2009 financial crisis, when bank bailouts in dollars didn’t crater the currency. Remember Zimbabwe’s $100 trillion note? I’ve calculated bitcoin being worth no more than a few hundred dollars. I’ll stick with that.

No, 2018 will not be the year of augmented reality. Techies salivate over the facial-recognition sensors in the iPhone X. But animoji karaoke is just not that big a deal. Augmented reality will come of age when I can go to Gettysburg, look through glasses toward Cemetery Ridge, and watch Pickett’s Charge play out in real time. Wake me when that happens.

The best-performing market in 2018 will be out of Africa. No real insight here. Some downtrodden market, most likely in sub-Saharan Africa, will come out of its slumber and double in value. Maybe Zimbabwe.

Net-neutrality regulations will be repealed, customers will be happy, and the internet won’t collapse. George Orwell would chuckle at neutrality proponents who doublethink a free and open internet through regulations. In reality, net neutrality comes free with competition and without regulators. I hope the same energy can be instead harnessed promoting fiber and 5G and any other competition-expanding technologies. As soon as the regulations go away, watch providers offer new discounted plans. Free internet with Amazon Prime?

China will experience financial indigestion. The International Monetary Fund is nervous about China. So am I. Property prices are inflated. Debt has become a bad drug. I’ve heard of consumer-goods companies that don’t pay their suppliers for a year, but then offer them financing so they can get cash. They then sell that supplier debt to the public—the same customers that buy the consumer goods. What could go wrong? Even a small glitch becomes a disaster.

The U.S. economy will do better than expected in 2018. Bit of a low hurdle here. After years of Obama -burdened 2% growth, a combo of regulatory reform and corporate tax cuts will unleash the animal spirits. I can see GDP growth over 3% each quarter in 2018, perhaps even surpassing the naysayer 4% barrier. And it’s exactly why interest rates will rise—see prediction No. 1.

The first disease will be cured with Crispr technology. Gene editing is very cool, and Crispr tools will reshape health care over time. But all I need is one disease to be cured. Heck, I’ll settle for canine flatulence or even colorblindness.

Two self-driving cars will collide with each other. It’s inevitable. Why not predict it?

December 04, 2017

It was almost a rite of passage. Soon after I started on Wall Street in the 1980s, sales folks from the trading floor invited me to dinner. We met at one of those fancy New York steakhouses where French wines flow like tap water. I felt part of a new fun group.

Until, that is, the bill came. Everyone looked at me and another new guy. “You know about the tradition, right?” I recall the senior salesman asking. “Last one in, pays.” At 26, I wasn’t sure my credit-card limit would be high enough. I sheepishly asked how to expense the enormous bill. Simple, I was told: Mark it down as a couple of cab rides a week. Oh, and welcome to Wall Street.

This story came to mind last month after Navnoor Kang, a manager at New York’s state pension fund, pleaded guilty to fraud. He had been bribed to direct bond business to the trading firms Sterne Agee and FTN Financial. This included vacations, drugs and prostitutes. I kept thinking: How the heck did the salespeople at these firms write off all this stuff on their expense accounts?

Wall Street was supposed to have been cleaned up by now. In 2006 the investment-banking firm Jefferies paid nearly $10 million in fines after lavishing gifts on Fidelity traders. These included “a booze-fueled bachelor party replete with strippers and dwarves,” according to the New York Post.

Two years later the Securities and Exchange Commission charged Fidelity for “improperly accepting more than $1.6 million in travel, entertainment, and other gifts paid for by outside brokers courting [its] massive trading business.” The perks included “premium sports tickets to events including Wimbledon, the Super Bowl, and the Ryder Cup golf tournament.” Fidelity cleaned house.

November 20, 2017

After the calamitous century between Russia’s October Revolution and Venezuela’s debt default last week, you might think socialism would be dead and buried. You’d be wrong: It’s capitalism that is back on the rack, being tortured and refitted according to the ideologies of its detractors. But be warned, when you modify the word “capitalism,” you are by definition misallocating capital. I call this fill-in-the-blank capitalism.

Bernie Sanders offers a fine place to start. “Do I consider myself,” he asked at an October 2015 rally, “part of the casino capitalist process by which so few have so much and so many have so little?” (Emphasis mine.) Never mind that it was a progressive hero, Barney Frank, who said in 2003 that he wanted to “roll the dice a little bit more in this situation toward subsidized housing”— which helped lead to the financial crisis. Now Mr. Sanders wants to load the dice: Free college for all. Free Medicare for all. Free rations for all?

Al Gore, an ostensible environmentalist who made millions dealing with oil-rich Qatar, is no stranger to ideological modifications. On these pages in 2011, Mr. Gore co-wrote “A Manifesto for Sustainable Capitalism,” which demanded that markets integrate “environmental, social and governance (ESG) metrics throughout the decision-making process.” Yet messing with critical price signals through “ESG metrics” is exactly what would make capitalism unsustainable. See: Frank, Barney.

A 2014 Huffington Post headline declared “Let’s Make Capitalism a Dirty Word.” This was right around the time that “Capital in the Twenty-First Century,” the French economist Thomas Piketty’s now largely discredited book, was published in English. Mr. Piketty called for a tax on dynastic wealth because of “a strong comeback of private capital in the rich countries since 1970, or, to put it another way, the emergence of a new patrimonial capitalism.” Tell that to Mark Zuckerberg and Larry Page, self-made billionaires who weren’t even alive in 1970.

Nobel Prize winner Joseph Stiglitz tried to one-up Mr. Piketty, complaining in a 2014 article for Harper’s magazine about “phony capitalism.” But he offered a remedy! “A well-designed tax system can do more than just raise money—it can be used to improve economic efficiency and reduce inequality.” Messrs. Stiglitz and Piketty and all the modern-day central planners will no doubt gladly make the economic decisions needed to right the ship after they have sunk it.

November 06, 2017

The past may be a Shakespearean prologue, but the future is dodgeball.

Ben Rosen, chairman of Compaq Computer Corp. and an early investor in Lotus Development, was the semiconductor analyst at Morgan Stanley eight years before me. In the late ’80s an embarrassingly lame online service named Prodigy was state-of-the-art, but I had visions of a multimedia world with text, pictures and eventually videos delivered through vast networks. Crazy, right? I asked Morgan Stanley’s uber-strategist, Barton Biggs, for advice, and he suggested we have lunch with Ben Rosen.

I was all of 30 and way out of my league, but we still trucked over to the Pan Am Building for a New York power lunch. I explained this multimedia thing. Mr. Rosen waved his hand and said in the nicest way, “I really don’t know anything about that.” I looked at Biggs, gulped, and asked Mr. Rosen for advice in general. He told me about building his venture-capital firm and running into investors on Sixth Avenue.

Then he rambled on about getting in the middle of things at events, conferences and seminars. He said that at first nothing will make sense and all these balls will be flying across the room out of your reach. But eventually you’ll find yourself in the middle of the room and balls will start hitting you. Then you’ll know you’re inside. As we walked out the door, I remember thinking, “That’s it? Gee, thanks for nothing.” Biggs agreed it was a waste of time. Turns out it was the best advice I would ever receive.

The thing about the future is that, as William Goldman wrote about screenwriting, “Nobody knows anything.” Everyone is an outsider, and it’s all up for grabs. Someone might have an opinion, but there are few facts. What you need are your own opinions about where the world is headed in any given industry: artificial intelligence, gene editing, autonomous trucks, marine salvage—whatever.

You need to go to places where the future is discussed. Every industry has these events. Make the time to go. And not only to hear keynoters billow hot air, but for the panel discussions where people disagree. The conversation spills out into the hallways between talks. There will be all sorts. The smug ponytailed guy who talks about his Phish tribute band and insists he knows everything. The woman you see at every event but only in the hallways chatting and who never makes eye contact to let you into a conversation. Barge in anyway. Remember, there are no facts, only opinions.

October 23, 2017

Forget fall foliage. I know only three seasons—baseball, basketball and football—and for the next week or so they coexist. They bring with them virtual strike zones, on-field stats, rotating 360-degree views, and yellow first-down lines. Technology has changed sports—but not always as intended.

Green Bay Packers return specialist Desmond Howard admitted after his 99-yard kickoff return in the 1997 Super Bowl that he’d had a technological assist: “You can use the jumbotron almost like a rearview mirror, and so that’s what I did.” Twenty years later, the Boston Red Sox got caught stealing Yankee catchers’ signs, relayed to the dugout via an Apple Watch. At least someone found a real use for the device. These examples are nothing compared with the benefits to fans from all the gizmos packed into stadiums and arenas. From pylon-cams to sensors capturing launch angles and exit velocities, the games are wired.

Gerard J. Hall runs SMT, a North Carolina-based company that provides broadcasters with much of the tech that enhances the viewing experience. He told me that “baseball actually uses our technology to train umpires.” To display an ESPN K-zone, every pitch is tracked for speed, location and path, and run through algorithmic filtering for accuracy. If you watch enough baseball, you know it’s way more accurate than human umpires. Will this technology replace the ump? “Assuming people want to get it right, it’s available,” says Mr. Hall.

Since 2015, the National Football League has placed chips under shoulder pads to track exactly where players move. Fans can’t get this data, but teams can. Mr. Hall tells me it can provide “instant analysis to coaches.” Real-time analytics and machine learning might someday even call for specific plays, like former coach Jon Gruden’s “Spider 2 Y Banana,” in certain scenarios. SMT is also working with Duke football on a system called Oasis, which will use biomedical sensors to track players’ heart rates, body temperatures and hydration—as if they’re astronauts.

So many of the changes in sports rules have been to attract fans and jam in more Chevy Silverado and Dr Pepper commercials. In football, illegal contact and downfield chuck regulations from 1994 favor quarterbacks and receivers, who run up scores. The National Basketball Association’s 3-point line, added in 1979, and its 2001 defensive three-second rule also favor offenses and more points. Even baseball has been accused of juicing the balls and lowered the pitching mound from 15 inches to 10 inches in 1969. More runs, more razors sold—up to a point.

I’m a techno-optimist, but even I can see the downside. With commercials and replay challenges, games have become painfully long. In the 1960s and ’70s, the Cardinals’ Bob Gibson pitched wins in under two hours. A Cubs-Nationals playoff game this month lasted 4 hours and 37 minutes. Long games also contribute to the NFL’s ratings problem, which began before the national anthem protests. Many fans care more about fantasy-football stats for individual players than about which team wins. “NFL players,” Mr. Hall says, “have become the random-number generators for people’s fantasy-football games.”

October 09, 2017

Stop me if you’ve heard this one: A horse walks into a Genius bar and buys an iPhone X. Siri asks, “Why the long face?”

Apple’s newest iPhone includes a 3-D facial recognition system that floods your face with 30,000 infrared dots. The A11 Bionic Chip, which runs 600 billion operations a second, analyzes the data. This enables Face ID to unlock the phone or create animated emojis in your likeness.

This is already pretty cool, but it doesn’t take much imagination to envision apps way beyond this. By recognizing a long face, or an otherwise troubled one, it could help diagnose and treat the millions of Americans who suffer from depression or bipolar disorder. It could even be part of the treatment, reminding them to take medication or to reduce stress. And this is only scratching the surface of what the new iPhone could do for health care—if allowed.

Facial recognition has other fascinating uses. Last month, Stanford professors Michal Kosinski and Yilun Wang published a study involving 35,000 dating-site images of white people between 18 and 40, all of whom had disclosed their sexual orientation. They ran these through a recognition program called Face++ and came up with a model that accurately predicted whether a man in a photo was straight or gay 81% of the time. They could do the same for 71% of females.

Right on cue, the hyperventilation began. A Bloomberg headline screamed, “ ‘Gaydar’ Shows How Creepy Algorithms Can Get.” The Verge fretted, “The invention of AI ‘gaydar’ could be the start of something much worse.” But is this even new? Jewish mothers have deployed J-Dar for centuries.

September 25, 2017

Has Ray Dalio lost the pulse? The founder of the $160 billion hedge fund Bridgewater Associates is all over the place spouting his management philosophy of radical transparency. He has been making TV appearances, attending conferences, and whenever possible plugging his new book, “Principles.” There’s even a TED talk touting his “believability-weighted idea meritocracy”—whatever that means. And now Mr. Dalio is trying to bust into China to manage even more money.

The investment whiz lives and manages by a set of principles that employees have to memorize. The list is filled with gems you might encounter at a silent yoga retreat. “Most problems are potential improvements screaming at you.” Or this reworked cliché: “While most others seem to believe that pain is bad, I believe that pain is required to become stronger.”

Speaking of pain, Bridgewater is losing money this year. Through July its flagship fund is down 3%, while the market is up more than 10%. Does this transparency stuff even work? Bridgewater videotapes every meeting and arms workers with iPads filled with apps like the emotion-relief Pain Button and the co-worker-rating Dot Collector. Mr. Dalio must figure that only under these conditions will employees tell the truth instead of what he wants to hear. Maybe this is all a distraction. But you’ve got to be a little cuckoo to run a giant hedge fund, and I think Mr. Dalio is crazy like a fox.

The core of investing is quite simple: Determine what everyone else thinks, and then figure out in which direction they are wrong. That’s it. No one tells you what they think. You’ve got to feel it. That’s why Wall Streeters say things like, “We are lowering our above consensus expectations earnings estimates.” It’s all about figuring out what is priced into a stock right now. That’s the pulse of the market, the collective mind meld aggregated into stock prices. I know from experience this is the hardest part of running a hedge fund. You can find the greatest story ever, but if everyone already knows it, there’s no money to be made.

And the pulse changes with each government statistic, each daily ringing of cash registers and satellite images taken of parking lots. That’s why stocks trade every day. Real-world inputs and the drifting pulse drive the psychotic tick of the stock market tape. Once you feel the pulse, then and only then can you figure out how everyone’s wrong about tomorrow, next month or next year. And believe me, they’re always wrong. Stocks rarely tread water.

How do you find that pulse? It’s hard enough to invest your IRA. Can you image managing $160 billion? Wall Street analysts have earnings estimates that no one trusts. There are whisper numbers and the chaos of message boards and tweets.

September 11, 2017

New York is a hell of a town, but technology is threatening its leadership in almost every category. High-speed trading and shadow banking threaten its strongholds in finance. Digital publishing and social media continue to disrupt magazines and newspapers. Streaming is upending television broadcasting, while enterprise software is displacing lawyers and accountants. New York’s public services—from schools to subways—are antiquated.

For centuries New York has evolved. With its deep port, the city dominated U.S. trade through the late 1800s. But that wasn’t enough to employ the swarms of immigrants coming through Ellis Island. So the city transformed, creating higher-paying jobs. By 1910 some 40% of all New York workers were employed in manufacturing—the garment industry, sugar refining, publishing and even bread making. My grandfather was in the millinery business. Manufacturing lasted even through the 1960s. I remember seeing shirts made in the Empire State Building. Total employment in the city peaked in 1969.

As post-World War II technology drove transportation costs down, manufacturing moved to the suburbs (and eventually Asia). Most large American cities stagnated. But New York transformed itself again, this time into a service economy with high-paying jobs in finance, media, fashion, law, accounting and health care. It also remained home to the most important stock market in the world. Today well over 90% of New York employment is in services, according to the New York state government.

But the city has arrived at a nasty inflection point again. New York risks becoming another Detroit. New York needs to embrace entrepreneurs, not repel them. No more Zuckerbergs heading west.

What form of transformation lies ahead? Some suggest New York must become the next Silicon Valley, a mecca for geeks to create the new multiprotocol routers and alternative energy processes. That’s been tried before and always fails (see Research Triangle, Bangalore, Cambridge, England, or Skolkovo, Russia). Instead New York needs to build on the technology that comes out of Silicon Valley and elsewhere, especially artificial intelligence and fintech, and use these advances to transform New York’s businesses.

Understanding these trends, then-Mayor Michael Bloomberg in 2011 launched an “applied science” competition, offering city land for a new campus. Stanford and Cornell wanted in, with the latter focused “on digital technology and its transformation of individuals, society and the economy.” This week one of the first new urban campuses in generations, Cornell Tech, opens on Roosevelt Island. As a Brooklyn-born Cornell engineer, I played a tiny role.

August 28, 2017

The price of a Bitcoin broke $4,000 this month. It’s up 400% in 2017, and only two years ago it stood at around $230. With 16.5 million Bitcoins in “circulation,” and the potential for 4.5 million more, the market value of Bitcoin is now a whopping $72 billion. Sister currency Ethereum is worth another $32 billion.

Early Snapchat investor Jeremy Liew thinks Bitcoin will reach $500,000 by 2030. Tech eccentric John McAfee believes it’ll take only three years. That’s $1 trillion of digital coins. Now companies with an idea for applications built on top of these currencies are raising hundreds of millions through initial coin offerings. Is Bitcoin the greatest rocket ship ever or will it end up a giant smoking hole in the ground?

In its simplest form, Bitcoin enables financial-transaction services on a peer-to-peer network that no one controls. Decentralized and anonymous, it uses an innovative software structure known as the blockchain to store a public ledger across an ever-growing network of servers. Unlike Visa or Mastercard , no single company buys computers. Instead, an ingenious incentive system pays entrepreneurs fees and rewards in a made-up currency to add servers to run the intense math of cryptography algorithms. Many sit in places where electricity is cheap, like Iceland, to minimize operating costs. This blockchain is the future and the path for decentralized innovation to roll out on the cheap.

And how does one value Bitcoins? Those who own them believe they are a currency or an asset like gold, valued for its scarcity. Others like the Securities and Exchange Commission and the Internal Revenue Service view them as a security to be regulated and taxed.

But Bitcoin is actually a business. It’s software as a service—transactions for a price, like credit cards. To record a transaction on the blockchain, a customer pays an average recommended fee of 450 satoshi per byte. (A satoshi is one hundred millionth of a bitcoin.) Miners also get bitcoin rewards for adding blocks to expand capacity. Around 1,700 bitcoins are paid daily in rewards. But business-wise, this is more like being paid in equity. Each day sees about $1 million in fees and $7 million in rewards.

August 14, 2017

An interesting detail went overlooked in the fury over fired Google engineer James Damore’s “diversity memo.” At the end of the document he calls for an end to mandatory “Unconscious Bias training.” Large corporations often force employees into re-education classes, this one a dull, hourlong, 41-slide seminar supported by study after study. Can these studies be trusted? Doubtful. Hands down, the two most dangerous words in the English language today are “studies show.”

The world is inundated with the manipulation of flighty studies to prove some larger point about mankind in the name of behavioral science. Pop psychologists have churned out mountains of books proving some intuitive point that turns out to be wrong. It’s “sciencey,” with a whiff of (false) authenticity.

Malcolm Gladwell is the master. In his 2008 book, “Outlier,” he argues that studies show no one is born better than anyone else. Instead success comes to those who put in 10,000 hours of practice. That does sound right, but maybe Steph Curry shoots hoops for 10,000 hours because he is better than everyone at basketball in the first place. Meanwhile I watch 10,000 hours of TV. Facing criticism, Mr. Gladwell somewhat recanted: “In cognitively demanding fields, there are no naturals.” News alert: Professional sports are cognitively demanding.

When reading people like Mr. Gladwell, you’re probably thinking many of the studies’ conclusions sound right but don’t really reflect your own experience. That’s probably because you’re not a hung-over grad student. Andrew Ferguson of the Weekly Standard studied behavioral economic studies and discovered many are done by grad students observing their peers doing trivial tasks. Then researchers draw hard conclusions from this. Rather than a study of human nature, behavioral science is, Mr. Ferguson observes, “the study of college kids in psych labs.”

Many of the studies quoted in newspaper articles and pop-psychology books are one-offs anyway. In August 2015, the Center for Open Science published a study in which 270 researchers spent four years trying to reproduce 100 leading psychology experiments. They successfully replicated only 39. Yes, I see the irony of a study debunking a study but add to this a Nature survey of 1,576 scientists published last year. “More than 70% of researchers have tried and failed to reproduce another scientist’s experiments,” the survey report concludes. “And more than half have failed to reproduce their own experiments.”.

July 31, 2017

Most investors love companies with pricing power. Me? Not so much. Consider the life of a wealthy expat who asked a broker to show him the most expensive apartments in Rome. The first, at €20,000 a month, was a dump. So was the second, at €18,000. Yet the third apartment, at €16,000, was well-maintained, with gorgeous views of the Italian capital. Sensing confusion, the broker explained that the first two apartments had sat empty for months—and the owners kept raising prices to make up for the lost rent.

Sound familiar? The U.S. Postal Service has seen first-class mail volume drop from a peak of 103.7 billion letters in 2001 to 61.2 billion last year. It raised rates from 34 cents to 49 cents to make up the difference. Movie tickets sold in the U.S. peaked at nearly 1.6 billion in 2002. Last year only 1.3 billion were sold. Meantime, average ticket prices jumped from $5.81 to $8.65.

The more prices rise, the more customers bolt. It’s like running up a down escalator and never getting to the top. With the stock market hitting highs just about every day, investors need to be wary of companies that raise prices to make their numbers. These stocks make for spectacular sell-offs on even the slightest earnings miss. Case in point:Starbucks , the $4.65 macchiato maker, slid nearly 10% on Friday.

Disney ’s stock has been stuck around $100 for the past few years as investors bite their nails over cord-cutters. ESPN and cable networks were over half of Disney profits in 2012. Figuring the party would rage on, ESPN signed multibillion-dollar TV deals with the National Football League and the National Basketball Association. The Oakland Raiders’ Derek Carr makes $25 million a year? Thanks, ESPN.

Yet the sports channel’s subscribers have dropped from 100 million in 2011 to 89 million today. So ESPN raised prices, from $4.69 per sub a month to $7.21 today, a fee five times as high as any other channel. This newspaper reported earlier this month that Disney is in talks with cable operator Altice USA to raise prices again by perhaps 6% a year and institute “minimum penetration guarantees” to make up the difference. We’ve seen this movie before: ESPN may be a few price increases away from losing another 11 million subscribers.

July 17, 2017

Donald Trump, whose wife speaks five languages, just wrapped up a pair of trips to Europe during which he spoke only English. Good for him. If Mr. Trump studied a language in college or high school, as most of us were required to, it was a complete waste of his time. I took five years of French and can’t even talk to a French poodle.

Maybe there’s a better way for students to spend their time. Last month Apple CEO Tim Cook urged the president: “Coding should be a requirement in every public school.” I propose we do a swap.

Why do American schools still require foreign languages? Translating at the United Nations is not a growth industry. In the 1960s and ’70s everyone suggested studying German, as most scientific papers were in that language. Or at least that’s what they told me. In the ’80s it was Japanese, since they ruled manufacturing and would soon rule computers. In the ’90s a fountain of wealth was supposed to spout from post-Communist Moscow, so we all needed to learn Russian. Now parents elbow each other getting their children into immersive Mandarin programs starting in kindergarten.

Don’t they know that the Tower of Babel has been torn down? On your average smartphone, apps like Google Translate can do real-time voice translation. No one ever has to say worthless phrases like la plume de ma tante anymore. The app Waygo lets you point your phone at signs in Chinese, Japanese or Korean and get translations in English. Sometime in the next few years you’ll be able to buy a Bluetooth-based universal translator for your ear.

Yet students still need to take at least two years of foreign-language classes in high school to attend most four-year colleges. Three if they want to impress the admissions officer. Four if they’re masochists. Then they need to show language competency to graduate most liberal-arts programs. We tried to get my son out of a college language requirement. He pointed to his computer skills and argued that the internet is in English. (It’s true. As of March, 51.6% of websites were in English. Just 2% were Chinese.) We lost the argument. He took Japanese and has fun ordering sushi.

It’s not as if learning another language comes with a big payday. In 2002 the Federal Reserve and Harvard put out a study showing those who speak a foreign language earn 2% more than those who don’t.

High schools tend to follow colleges’ lead, but maybe that’s beginning to change. I read through all 50 states’ language requirements and only one requires either two years of a foreign language or two years of “computer technology approved for college admission requirements.” Wow. Is that California? No. New York? No. Would you believe Oklahoma? South Dakota and Maryland also have flexible language skill laws. Foolishly, the Common Core state standards are silent on coding.

July 03, 2017

You think this market’s crazy? One day in early 1987, with Wall Street humming, a meeting after trading closed involved several cases of champagne. The Dow Jones Industrial Average had breached 2000 that day, a cause for celebration. A week and a half later, more champagne was ordered when the average passed 2100. Then again a few weeks later for 2200. Eventually my boss stopped buying bubbly when breaking records became the norm. Japanese insurance companies would show up at the brokerage firm where I was a securities analyst and ask for a list of our five favorite stocks, then hand it to their salesman and say “buy 50,000 of each.”

On Friday, Oct. 16, 1987, the average dropped 108 points. Rumors swirled that we’d celebrate with cases of Bud Light. No matter: I was with some traders and a client in a stretch limo, headed to watch Mike Tyson fight Tyrell Biggs for the heavyweight championship—an event staged by Donald Trump in Atlantic City, N.J. Man, I miss the 1980s.

The market truly crashed the next Monday, dropping 508 points, or 22.6%. In retrospect, there had been signs all over the place. How did everyone miss them? Well, as the old Wall Street adage goes, no one rings a bell at the top (or bottom) of the market.

So here we are in 2017. The stock market is supposed to be the great humbler, but the records are coming fast and easy. The Dow Jones Industrial Average is up 8% for the year and flirts with a record practically every day. Some of this is structural: Bonds are no fun, since the yield curve is flattening and three-month Treasurys are 1%. So money flows to stocks—and other weird things.

A friend of mine used to run a large-growth mutual fund. In the dot-com mania of 1999, he told me that tens of millions of new capital would flow in every single day. Trying to figure out where to put it, he would consider the new batch of initial public offerings—and then inevitably he just would buy more Yahoo or America Online or Cisco or, what the heck, Yahoo again.

Today, money is flowing into exchange-traded funds. But because ETFs are weighted by market cap, that money flows into the biggest names: Facebook , Amazon, Apple, Microsoft , Google. Classic momos, or momentum stocks. The church of what’s working now. What could possibly go wrong?

June 19, 2017

At Harvard’s commencement last month, dropout Mark Zuckerberg told eager graduates to create a new social contract for their generation: “We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful.” He then said to applause: “We should explore ideas like universal basic income to give everyone a cushion to try new things.” Who wouldn’t like three grand a month?

Having the government provide citizens with a universal basic income is the most bankrupt idea since socialism, but others in Silicon Valley still have been proselytizing money for nothing. “There will be fewer and fewer jobs that a robot cannot do better,” Tesla CEO Elon Musk said at the World Government Summit in Dubai earlier this year. “I think some kind of universal basic income is going to be necessary.”

Robert Reich, President Clinton’s labor secretary, summed up the wrongheaded thinking a few months ago: “We will get to a point, all our societies, where technology is displacing so many jobs, not just menial jobs but also professional jobs, that we’re going to have to take seriously the notion of a universal basic income.”

This is a false premise. All through history, automation has created more jobs than it destroyed. Washboards and wringers were replaced by increasingly inexpensive washing machines, while more women entered the workforce. Automated manufacturing and one-click buying has upended retail, yet throughout the U.S. millions of jobs go unfilled. With Amazon’s proposed purchase of Whole Foods , the online giant is primed finally to bring efficiency to the last mile of grocery shopping—but don’t count on all grocery jobs to disappear.

The economics, which they apparently stopped teaching at Harvard, are straightforward: Lowering the cost of goods and services through automation allows capital—financial and human—to attack even harder problems. Wake me up when we run out of problems.

These kinds of predictions aren’t new, and they’ve been wrong almost always. In 1930 John Maynard Keynes envisioned that his grandchildren would have a 15-hour workweek. Sam Altman, who runs the startup incubator Y Combinator, dabbles in similarly bold but meaningless statements. “We think everyone should have enough money to meet their basic needs—no matter what, especially if there are enough resources to make it possible,” he wrote last year, while admitting he has no idea “how it should look or how to pay for it.”

June 05, 2017

Want to know what scares tech executives? It’s not competition from China, WannaCry ransomware attacks, or being coded out of existence by Mark Zuckerberg clones. It’s radial tires.

Until around 1970, almost all cars and trucks rolled on bias-ply tires. Under the rubber treads, nylon belts ran diagonally, at 30 or 45 degrees, forming a crosshatch. This allowed for stronger sidewalls and cheaper manufacturing. The problem was that bias-ply tires needed to be changed every 12,000 miles.

Then along came radial tires. Introduced in 1949 by Michelin, radials have steel belts inside that run across the tread at a 90-degree angle. They are wider, better at dissipating heat, and safer. Although radials cost a little more to manufacture, they last at least 40,000 miles.

The first American car that came with radials was the 1970 Lincoln Continental. Four years later, Goodyear was making only radial tires. Other companies missed out and paid dearly. By the end of the decade, radials effectively had 100% market share for cars.

Which brings us back to Silicon Valley. In the 1980s and ’90s, technology was changing so fast that a new computer was almost disposable. You upgraded every few years. But as innovation slowed, they lasted longer, which meant fewer people buying computers.

Bill Gates was worried about this all the way back in 1991. “When radial tires were invented,” he said in an interview, “people didn’t start driving their cars a lot more, and so that means the need for production capacity went way down, and things got all messed up. The tire industry is still messed up.”

During the dot-com boom, Mr. Gates invoked the analogy again. “Every time I read about optic fibers or wireless, I say to myself, ‘Wow, that sounds like radial tires,’ ” he said. “When they got radial tires did people drive four times as much just because the tires lasted longer? No, the industry shrank.”

May 22, 2017

Foot Locker’s stock imploded on Friday—crashing down $12, or 17%. It happens all the time, one of the great features of the stock market. A week earlier, Snap, which went public two months ago, saw a chunk of value disappear. It dropped almost 25% overnight after the social-media firm revealed that sales were up only 5% and the number of users was a little light—oh, and that it had lost $2.2 billion. That’s billion with a “b.” Even if you take out one-time costs, the company lost $200 million on $150 million in sales. Impressive.

Did I mention CEO Evan Spiegel got a $750 million bonus for taking the company public? Investors who bought the stock didn’t want to ruin the party, figuring it was going turn into the next Facebook. Snap’s stock was selling at 44 times future sales, on the expectation that growth and profits were coming. Or not. After lousy earnings, investors basically shouted, “Enough!”

No one sits around and says, “we need to teach Snap a lesson.” Rather, it’s the collective selling that sends the message. That same day, CEO Travis Kalanick of Uber, another company with gargantuan losses and personnel issues, tweeted and then deleted, “Thank God we’re not public.” But Uber should be public. If only for the discipline of the public markets that its board of directors refused to impose.

Many people think the stock market is a cesspool of Wall Street greed. I look at it differently. To me, the stock market is the greatest enforcer ever invented. No person controls the market. Investors separately make decisions every day to buy and sell. But collectively they enforce discipline on corporations.

May 08, 2017

Forty years ago Monday the Grateful Dead played in upstate New York at Cornell University’s Barton Hall. Memorialized as “5-8-77” on a million cassette tapes, it is considered their best, a legendary show, the band’s Holy Grail. A good friend ran the concert commission and assigned me, a lowly freshman, to turn on the house lights when the show ended. Things have changed over the past 40 years, but it took time to make out what was illuminated that night.

The Grateful Dead began playing in 1965 as the Warlocks, right before the flower-power era they ushered in. Their opening gig was a Wednesday night at a pizza joint named Magoo’s in downtown Menlo Park, Calif. I’d be surprised if more than 20 people showed up, but they still planted seeds of what you’ll recognize as modern innovation in the heart of what is now Silicon Valley.

Eventually a vast army of fans known as Deadheads arose. Though not me, as I didn’t look good in tie-dye. Deadheads were nonconformists but amazing trendsetters. As they trucked into the show, I noticed many clumsily hobbling on crutches. It wasn’t until the concert started that the audience turned these crutches into makeshift microphone stands, rising high above the crowd to tape the performance. Most of the band’s more than 2,000 shows were pirated. From this emerged a peer-to-peer network: bootleg cassettes passed between fans, an early sharing economy.

Networks were a powerful thing, but the recording technology was rudimentary. When a cassette was duplicated, the sound of the tape moving over the playback head would end up on the recorded copy as an annoying hiss. The further from the original, the worse the hiss. I used to walk into friends’ rooms and snark, “Is this Cow Palace ’74? Man, the hiss player was really on that night.” I haven’t changed much since then.

The Grateful Dead could have put a stop to it all, frisking concertgoers as they entered, but the band accepted piracy. A viral marketing campaign started. Free music lured new fans, who practically toured with the band and bought tickets, shirts and posters. They then made more cassettes, enchanting even more fans. This is the power of free that Facebook and Google have since perfected. Also, I’m pretty sure the band’s fans invented virtual reality. I heard many at shows say they could see things that weren’t really there.

April 24, 2017

This month Apple became the 30th company to receive a permit to test autonomous vehicles on the mean streets of California. I can’t wait to have that ponytail guy at the Apple Store Genius Bar check my oil. Beyond a $150 permit fee, the Department of Motor Vehicles requires these businesses to report all traffic accidents involving their self-driving cars. I read all the reports, and they’re mostly minor fender-benders.

Self-driving cars exist only because of artificial intelligence and machine learning. They aren’t so much programmed; rather, their sophisticated pattern-recognition-systems identify oncoming traffic, road stripes and stop signs. Autonomous cars will eventually be safer than what we have today. A time of fewer accidents and saved lives is coming.

But these cars still have a lot to learn. Most of the posted accidents involve Google’s cars, which have clocked some two million street miles. Impressive, but it’s still only the equivalent of what 200 normal drivers put on their vehicles in a year. That’s statistically insignificant given there are more than 250 million cars and trucks on American roads. Artificial intelligence needs lots more data.

Google Photos, which uses similar machine learning for facial recognition, hosts billions, maybe even trillions, of pictures. It is wicked smart, a window into a fantastic, if not slightly creepy, future. You tag a face with a name. It then correctly finds that face in other photos—even if they’re a decade old and have 30 other people in them. If you ask Google how it works, the company will say machine learning. But no one really knows exactly.

April 10, 2017

Rising above the San Francisco skyline, a few short blocks from where Mel Brooks filmed the Hitchcock “Vertigo” spoof “High Anxiety,” is the 1.6-million-square-foot Salesforce Tower, soon to be the company’s new headquarters and the second-tallest building west of the Mississippi. As the stock market reaches dizzying heights, my thoughts turn to the toughest decision for investors: when to sell a stock.

Wall Street’s most successful players get ahead of the news, understand a CEO’s mind, and figure out where the company is going. To do this, I often use what I call the “HQ Indicator.” It’s for those playing long ball, not day traders, but it is simple. When a company announces it is moving its executives into a lavish palace, it’s often time to get out.

Consider the Frank Gehry-designed IAC Building in Manhattan, completed in 2007. It’s the deconstructivist-style headquarters for InterActiveCorp , owners of CollegeHumor and Tinder. I find it ugly. And IAC stock deconstructed itself, going from around $40 in 2007 to under $15 two years later, though it has since rebounded.

Or the $1.7 billion Time Warner Center overlooking New York’s Central Park. Opened in October 2003, it’s a “city within a building.” Time Warner’s stock was $45 at the time, hit $68 in January 2007 and then dropped to $17 two years later. It didn’t get above $45 again until 2012.

Why does the HQ Indicator work? Investors in public companies have no control and are at the whims of management. Are a company’s leaders frugal, or do they spend shareholders’ money like drunken sailors? Are they modest or do they have the hubris that leads to an edifice in honor of the CEO’s greatness and legacy? Will management be tempted to rush to fill the huge swaths of new empty headquarters space, often taking on questionable businesses?

March 27, 2017

Ludd was the 18th-century folk hero of anti-industrialists. As the possibly apocryphal story goes, in the 1770s he busted up a few stocking frames—knitting machines used to make socks and other clothing—to protest the labor-saving devices. Taking up his cause a few decades later, a band of self-described “Luddites” rebelled by smashing some of the machines that powered the Industrial Revolution.

Apparently this is the sort of behavior that would make Mr. Gates proud. Last month in an interview with the website Quartz, the Microsoft founder and richest man alive said it would be OK to tax job-killing robots. If a $50,000 worker was replaced by a robot, the government would lose income-tax revenue. Therefore, Mr. Gates suggested, the feds can make up their loss with “some type of robot tax.”

This is the dumbest idea since Messrs. Smoot and Hawley rampaged through the U.S. Capitol in 1930. It’s a shame, especially since Bill Gates is one of my heroes.

When I started working on Wall Street, I was taken into rooms with giant sheets of paper spread across huge tables. People milled about armed with rulers, pencils and X-Acto Knives, creating financial models and earnings estimates.

Spreadsheets, get it? This all disappeared quickly when VisiCalc, Lotus 1-2-3 and eventually Microsoft Excel automated the calculations. Some fine motor-skill workers and maybe a few math majors lost jobs, but hundreds of thousands more were hired to model the world. Should we have taxed software because it killed jobs? Put levies on spell checkers because copy editors are out of work?

Mr. Gates killed as many jobs as anyone: secretaries, typesetters, tax accountants—the list doesn’t end. It’s almost indiscriminate destruction. But he’s my hero because he made the world productive, rolling over mundane and often grueling jobs with automation. The American Dream is not sorting airline tickets, setting type or counting $20 bills. Better jobs emerged.

Mr. Gates may be worth $86 billion—who’s counting?—but the rest of the world made multiples of his fortune using his tools. Society as a whole is better off. In August 1981, when Microsoft’s operating system first began to ship, U.S. employment stood at 91 million jobs. The economy has since added 53 million jobs, outpacing the rate of population growth.

March 04, 2017

Two years ago, around 9 at night, my 18-year-old son came home after studying for a test. Luckily I was there to greet him. We talked briefly about the full moon, and then he gasped and collapsed. His heart had stopped. Another son heard my screaming and got my wife to call 911. Another started CPR. Then early responders, ambulance, intensive-care unit, induced coma, feeding tube, batteries of tests, neurologists, physical therapists, a defibrillator installed. Twenty days later he walked out of the hospital. The total bill was over $1 million, nearly all paid by insurance.

We were fortunate. According to the American Heart Association, the fatality rate from sudden cardiac arrest is 90%, and over 50% even if someone is nearby to administer CPR. My son is now a sophomore in the Big Ten and loving life.

As you can imagine, my family now supports and volunteers for heart screenings done at area high schools. Screen Across America’s website shows the location of 60-plus organizations that provide screenings for students, in addition to instruction on how to do CPR and use portable defibrillators (though less than 1% of schools have them). In 2016, the American Heart Association estimates, more than 350,000 people in the U.S. experienced out-of-hospital cardiac arrest. That’s probably low; cardiac arrest while driving is an elusive statistic in fatal car accidents.

These volunteer-run free screenings, which include a 12-lead electrocardiogram, cost about $13,000 for 750 students, or less than $20 each. These screenings find that about 1% of young people have abnormal heart conditions—cardiomyopathy, Long QT syndrome and other heart arrhythmia problems. Early detection saves lives.

At the last screening I attended, I kept asking myself: Why do volunteer organizations have to do this? Why not schools? Or pediatricians? Why isn’t it mandatory?

A physical for clearance to play high-school sports involved a blood-pressure check, sticking out your tongue and saying ahh, and maybe a bump on the knee with that little rubber hammer. But no EKG. At under 20 bucks a pop, why not?

The NCAA doesn’t require EKGs for collegiate athletes either. That borders on negligence. Why isn’t an EKG part of every physical? The reason, it turns out, is that EKGs have been notoriously bad predictors, especially for the young. Upward of 25% of tests flag problems that don’t actually exist—false positives. Finding the 1% with real problems means expensive and emotionally distressing testing for the other 24%. Follow-up echocardiograms (ultrasound heart scans) and stress tests, let alone MRIs and CT scans, can run thousands of dollars. So doctors don’t do them.

That’s health care today—early detection often loses to the old “wait until they get sick and then we’ll treat ’em” regime. For 90% of cardiac arrests, treatment is not an option. And there are plenty of other notoriously high false-positive tests: mammograms, colonoscopies, and especially prostate-specific antigen tests.

But technology now exists to solve the false-positive problem. Recognizing that the young have different heart signatures than the general population, a group of leading pediatricians and sports doctors from around the world came up with the Seattle Criteria as a way to pinpoint heart abnormalities. It then got coded into an algorithm, a filter that looked for specific patterns that statistically indicated real, not false, positives. A $2,500 battery-operated 12-lead EKG from a company named Cardiac Insight is connected via Bluetooth to a laptop that electronically analyzes your heart rhythms and runs them through the Seattle Criteria algorithm.

There is even a newer algorithm known as the Refined Criteria, which also reduces the number of false positives in athletes. These algorithms improve over time with more screening data matched with real health outcomes. Instead of 20% to 25%, we could see false positives dropping to below 3%, according to recent research. That’s industry-changing. Smartphone-enabled EKG devices will also hit the market. Couple that with a $7,000 portable echocardiogram device from Philips that hooks to a tablet, and you’ve got a process more accurate than most cardiologists because it’s data-driven.

Until recently, prompted by the 1912 Titanic disaster, swimming tests were required at many universities. It’s time to make an EKG test part of a standard physical for sports and even college admissions. Brian Hainline became the NCAA’s chief medical officer in 2012. He initially pushed for heart screening but quickly backed off, telling the American Heart Association News in 2015: “At this point in time, it doesn’t make sense for us to recommend [EKG] screening.” Of course not, false positives were too expensive. But not anymore.

So what will it take? My guess is we are one lawsuit away from the NCAA implementing mandatory screening. Just run the numbers. There are close to half a million student-athletes at U.S. colleges. Even a 10% false-positive rate means 50,000 would need follow-on tests at around $2,000. That’s a total cost of $100 million, at least. But with a 2% false-positive rate, we’re talking $10 million for further testing. One juicy lawsuit all of a sudden justifies a wide screening. Like it or not, money talks. Next up would be screening the four million students who enter American high schools each fall.

While we’re at it, why not launch a nationwide initiative for low false-positive cancer screenings? No dramatic “moonshot,” just real science. The way to save lives is to catch disease early, before treatment is expensive, financially and emotionally. I think about this every time I see a full moon.

February 03, 2017

Like it or not, Donald Trump has disrupted politics. You might even say he is the first Silicon Valley president. What Amazon did to bookstores, Napster to music and Uber to taxis, Mr. Trump has done to the Republican Party, presidential elections and maybe global governance. “Move Fast and Break Things” posters were plastered all over Facebook. Sound familiar?

On the surface, Mr. Trump and Silicon Valley are oil and water. He’s a real estate guy. Highly leveraged. From a family business. Scorns immigrants. Antitrade. But they definitely share disruptive DNA. No respect for authority. High risk, high return. People think you’re crazy, tilting at windmills. Self-driving cars? Trump as president? It’s all crazy until it isn’t.

Like Silicon Valley, Mr. Trump breaks all the rules. Amazon fought state sales taxes while it grew. Uber ignored cease-and-desist orders. Napster never even heard of copyrights. Mr. Trump insulted opponents, dispensed with a ground game, and didn’t bother with much TV advertising. Every entrepreneur reads the book “The Lean Startup.” Mr. Trump could write “The Lean Campaign.”

Both view Twitter as a weapon of mass (media) disruption. Like Mr. Trump, many in Silicon Valley speak in sentence fragments—a perfect fit for Twitter’s 140-character limitation. Mr. Trump is obsessed with his poll numbers the same way Silicon Valley obsesses with likes and retweets and harvesting followers.

Mr. Trump has a unique relationship with the truth (see Theranos). He appears thin-skinned (see Steve Jobs). And much as Amazon has quietly built a world-beating cloud business and Uber a delivery company, Mr. Trump often says one thing to distract opponents while he does something else.

Mr. Trump wants to make America great again, while Silicon Valley wants to make the world a better place. And life imitates art, which imitates life. On HBO’s fictional “Silicon Valley,” Gavin Belson, CEO of Google-like Hooli, Trumpingly declares: “I don’t want to live in a world where someone makes the world a better place better than we do.”

January 10, 2017

ObamaCare was always about paying for health care—costs have outpaced inflation for decades—but seldom about keeping people healthy. As Republicans repeal and replace, they need a vision for the path to better care. Technology now exists to provide cheaper and higher-quality health care, but giant roadblocks stand in the way.

That technology is artificial intelligence and machine learning. The algorithms behind AI are painfully complex, but the final product is simple—think Google Translate or Amazon’s Alexa. Saying a phrase and immediately having it translated is cool. Being told that your week of bad sleep and slight stomach pains could be cancer is life-altering.

Machine learning is already invading health care. Experts at Kaggle, an artificial-intelligence research firm, shared a few real-world applications of the technology with me: Predicting heart failure by looking at massive amounts of MRI scans, diagnosing diabetic retinopathy from eye imaging, and successfully predicting seizures with a machine analyzing electroencephalogram data.

The key is data. With more of it, accuracy gets better over time. At least on the surface, the Obama administration did something right—the Health Information Technology for Economic and Clinical Health, or Hitech, Act. Part of the 2009 stimulus largess, it set aside some $20 billion worth of incentives for hospitals and doctors to show “meaningful use” of electronic health records, or EHRs.

Tons of data come with medical records. Then there are digital scales, Fitbit steps, WellnessFX blood tests, Apple iWatch data and 23andMe genetic test results. Eventually there will be daily commode sensors measuring blood sugar and prostate-specific antigen levels, among other things. Now imagine all that data being crunched, in real time, by machines looking for patterns—which then put out a simple text message. “Your Hemoglobin A1c has spiked again. I thought we agreed to cut back on the linguine.”

December 28, 2016

Wilbur Ross to run the Commerce Department? The 79-year-old distressed investment guy? At first it makes no sense. Bottom fishing old industrial companies is not the magic elixir to fix our economy. The Ross nomination reminds me of a Kidder Peabody executive’s line in 1987, when General Electric announced a new CEO for its investment banking subsidiary: “I was thinking just the other day that what we need around here is a good tool-and-die man.”

I met Mr. Ross a few years back when he was touting his investments in shipping companies. Those firms were, as many still are, very distressed. But Mr. Ross has also dabbled in mining, tractors, energy and other machinery. What is distressed investing? Simply recognizing when a seller is desperate to unload, at almost any price. The trick is patience and an iron gut—oh, and deep pockets.

In 1998 I sat across from a South Korean executive in need of hard dollars as the Korean won imploded in the nasty currency crisis. Our fund was a co-investor in a company that pioneered HDMI for high-definition TVs. I watched as sweat dripped from his face. Clearly distressed. We lowballed an offer. He took it. Nine months later the company went public at 10 times our bid. Distressed investing never leaves you. Much to my family’s annoyance, I only buy distressed tickets to sporting events. I even bought tickets to the Super Bowl at a serious discount the morning of the game.

Treasury Secretary-designate Steven Mnuchin made a fortune buying mortgage company IndyMac in a distressed sale about eight years ago. The government was so anxious to unload, it protected Mr. Mnuchin and his group from almost all losses over 30% on many mortgages. Nice deal if you can get it. (He was the only bidder.)

The guy that knows the most about distressed properties is President-elect Donald Trump—except he was on the other side of the table. His Atlantic City casinos were bleeding losses and desperately needed cash. Even Mr. Ross figured that one out and put up capital, but not before Mr. Trump turned the tables, commanding concessions by insisting any new investors would be distressed without the Trump brand on the building. The distressed turned distressor.

Which brings me back to Mr. Ross at the Commerce Department. This usually seems like a do-nothing job—see President Obama’s choice, Penny Pritzker of hotel-empire fame. So why pick Mr. Ross? Well, distressed is what we need. No, not here in the U.S., where a little tax reform and regulatory relief could reignite the stimulative fire. It’s the rest of the world, I can’t help but noticing, that’s a hot mess.

You can buy most of Venezuela in exchange for a Happy Meal. Many real-estate properties are at a deep discount in Brazil. We’re one dead Castro away from JetBlue flights filled with roller bags of cash headed to Havana. The euro is closing in on dollar parity. A Grecian earns less today than 10 years ago. Italian banks are threatening collapse and causing political turnover. Et tu, France?

December 16, 2016

President-elect Donald Trump proclaimed at the start of his campaign, “I’ll bring back our jobs from China, from Mexico, from Japan, from so many places.” But his mostly protectionist prescriptions of tariffs or declaring China a currency manipulator would probably kill jobs and tank the economy.

Here’s an idea for the incoming administration. To “bring back” jobs in 2017, go back in time to 1944. That’s when Congress passed the Servicemen’s Readjustment Act, better known as the GI Bill. In addition to mortgages and loans, the GI Bill provided tuition for education. By 1947, half of those admitted to college were veterans, according to the Department of Veterans Affairs, and nearly eight million participated over 12 years. It completely revamped the U.S. workforce and provided skilled labor for the go-go economy in the 1950s and ’60s.

Today, according to the Bureau of Labor Statistics, there are 145 million nonfarm jobs in the U.S. Some 15 million Americans who want to work aren’t able to find any. Yet there are currently 5.5 million job openings. This suggests a huge mismatch between jobs and skills.

How about a modern version of the GI Bill, but for everyone. I propose the Re-Hi Bill of 2017. If you’re unemployed, you get a voucher or tax credit for education. No, I’m not going all Bernie Sanders on you, with “free” public college adding billions to the national debt. Instead, there’s a twist: These programs would be online only, drastically lowering costs.

Udemy, which bills itself as the world’s largest destination for online courses, has thousands of courses in computer skills and art and teacher training for $200. The online-education firm Ivytech teaches people how to use digital technology that controls machine tools. HHAOnline has $89.99 online courses for home health care. Coursera, another big player in online education, teaches all aspects of robotics.

No application essays. No Education Department messing with course selection. No teachers union. No degrees. Instead, only a computer or tablet—and successful completion produces a certificate. The right combination of certificates puts you on a list to be hired for all sorts of jobs: computer-support specialist, outside electrician, freight-stock worker, sonographer, radiation therapist, actuary. The list goes on.

November 09, 2016

Whenever my young sons would ask for something, like an Xbox, I’d say no. “Why not?” they’d wince. “All our friends have one.” To which I’d reply, “I didn’t have one when I was your age.” As they got older, they wised up. When I told them “I didn’t have an iPhone when I was your age,” I got the Monty Python-inspired comeback: “Let me guess—you walked to school, uphill, both ways.” Eventually, they got their iPhones, but not until after a lecture about the land of plenty they live in.

It’s a lesson easily forgotten because progress is a creeping thing. Society doesn’t get wealthy overnight. But it does get wealthy. Three years ago, in his speech calling income inequality “the defining challenge of our time,” President Obama lamented people’s frustrations. “It’s rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. And it’s rooted in the fear that their kids won’t be better off than they were.” To coin a phrase, the only thing we have to fear are those peddling fear itself. Won’t be better off? Our kids are billionaires compared with us.

In 1970, Intel pioneered integrated memory chips to replace wire-wrapped diodes. The 3101 was a 64 bit SRAM chip that IBM and others could buy for $40 each. Let’s call it a buck a bit. Today, unless you’re one of those die-hard retro flip-phone types, you’re carrying around an iPhone or Android with at least 32 gigabytes of memory. At a buck a bit, that’s . . . wow, congratulations! You’re a billionaire! We all are.

In the early ’80s, as an engineer at Bell Labs, I used to buy VAX 11/780 computers from Digital Equipment. They required giant air-conditioned rooms with raised floors and fire-suppression sprinklers. All in, they cost $1 million of Ma Bell’s money from overpriced long-distance calls. This particular machine could run at 1 MIPS or million instructions per second. Let’s call it a buck an instruction per second. Today, you can buy a 4 GHz i7 quad-core computer. No air-conditioning required. You’re a billionaire!

Until the late ’90s, if you wanted to go online with more than a 56K modem—that’s 56,000 bits per second—you had to buy what was known as a T-1 line from AT&T and others. A T-1 line was 1.5 megabits per second and would run $12,000 a month or $150,000 a year. Let’s call it 10 cents per bit per second. Today, if you’re lucky enough to live in 50 cities that have gigabit fiber to the home, you’re a billionaire, almost!

In April 2003, the Human Genome Project finished sequencing human DNA. It took 15 years and cost $2.7 billion. Today the California company 23andMe will sequence your genes and in weeks you’ll “receive 65 online reports on your ancestry, traits and health” all for $199. Congrats. You’re a billionaire.

The ability to use these same tools to sequence the DNA of tumors and provide precision medicine to eradicate cancers is priceless, something billionaires didn’t have just five years ago. Think about that. You don’t have to compare yourself to living in the smoggy ’70s that no one really remembers (or was that the ’60s, I don’t remember) but you’re a billionaire compared with folks living just a few years into the 21st century.

October 17, 2016

Snapchat is not about to disappear—this newspaper reported earlier this month that the firm may go public next year with a $25 billion valuation. Don’t you wish you had invested at a $500 million value? Lots of investors underwater this year sure do.

Last month Perry Capital, which peaked with $15 billion under management in 2007, closed its flagship fund. Richard Perry, a Robert Rubin protégé, complained in a recent letter to investors that “this market environment has not worked well for us.” Really? The Dow is now within a hair of its all-time high.

Some 10,000 hedge funds invest almost $3 trillion. More funds closed than opened over the last year. With $20 billion in assets, Lansdowne Partners is down almost 15% this year. The Rhode Island State Investment Commission is cutting hedge-fund holdings by half, following Calpers dropping hedge funds altogether last year. What’s going on? This isn’t a nasty bear market.

So many asset classes are in a funk. Macro investing, making bets based on major geopolitical trends, was all the rage over the last 25 years. But George Soros breaking the Bank of England is a thing of the past. Debt is now monetized rather than rationalized. There is a glut of commodities—from forests to food. Energy is fracked. Private equity probably peaked a few years ago, but it hasn’t yet marked to market. And bonds? When you have to pay Germany to own its sovereign bonds, it is tough to make money. That leaves stocks.

Equity investors have loved lower interest rates, because they make stocks more attractive than bonds and increase the value of future earnings. But at zero and even negative interest rates, it is a mess. Think of zero rates as a compass that can’t point north and only spins around. Dividend-discount models to value stocks are driven by a discount rate that at zero makes every stock worth infinity. So stocks look cheap, even though they’ve never been more expensive.

What to do? The first rule of investing, unlike Fight Club, is that there are no rules. Investing is like fashion. What’s hot and what’s not changes at the whim of the market. It used to be every fund owned Apple, until it stopped working. Right now we are in what CNBC’s Jim Cramer calls a Fang market, because of the power of Facebook, Amazon, Netflix and Google. Google has done the worst of the bunch since January 2015—up only 50%. Netflix and Amazon have both doubled. In an economy with 2% GDP growth, not much else works.

September 17, 2016

The capital of Silicon Valley is ready to abdicate. A few weeks ago, bizarre as it might seem, Palo Alto Mayor Patrick Burt came out against jobs. “We’re looking to increase the rate of housing growth,” he told Curbed San Francisco, “but decrease the rate of job growth.”

Think about that. Almost every mayor in the U.S. is wracking his brain trying to entice jobs into town. Yet Palo Alto—3.8% unemployment, a magnet for the geek class, the place that nurtured Facebook—is telling everyone else to get lost.

I had to meet this guy. Near City Hall, I pulled my (proudly gas guzzling) car into a spot between a white Tesla and a black Tesla. This was the Coral parking zone, giving me two hours before I had to move to the Lime zone. Nearby stood the Epiphany, a new $800-a-night hotel, just down from the ancient House of Foam, fulfilling all your polyurethane and polystyrene needs. Next to the Verizon Wireless store, the old Stanford Theater was showing a Ruth Chatterton double feature. Palo Alto, 65,000 people sitting on 26 square miles of some of the most valuable land anywhere, is certainly a town of contrasts.

The city doesn’t have a mayoral election. Instead, the council members, some of whom identify as slow-growth “residentialists,” install one of their own as mayor for a one-year term. Now it’s Patrick Burt’s turn, and he’s making the most of it. “Big tech companies are choking off the downtown,” he told the New York Times.

Right before the mayor went rogue, one of the city’s planning commissioners, Kate Downing, resigned in an open letter. Her family, she said, couldn’t afford to live in Palo Alto any longer. She’s got a point.

Michael Dreyfus, a top real-estate agent in the area, says the cheapest home for sale is a three-bedroom, one-bathroom, 959 square footer on about an eighth of an acre that backs up to train tracks. The asking price (are you sitting down?) is $1.35 million. Or he can sell you a place with five beds and four and a half baths on less than half an acre for $17.5 million. OK, that one is in desirable Old Palo Alto, but it isn’t even that old—no cobblestone streets or anything

September 14, 2016

Mark Zuckerberg created a stir over an Instagram post this summer of him at his desk. If you look closely, you’ll see tape covering the Facebook CEO’s laptop camera and microphone jack. Does he know something we don’t? Well, yes.

Hackers are virtually (pun intended) everywhere. Mr. Zuckerberg’s Twitter and Pinterest accounts were hacked in early June, before the photo was taken. The Democratic National Committee had 20,000 emails released on WikiLeaks right before the party’s July convention. The Federal Reserve recently admitted it’s had more than 50 cyberbreaches over the past five years. In August the National Security Agency, which says its role is to “lead the U.S. Government in cryptology” got, you guessed it, hacked.

There are essentially three reasons to hack into someone else’s systems: cash, control or cred—as in street cred. Debit and credit cards are usually the prize. Target and other retailers got nailed a few years ago, resulting in those annoying chip cards, which are slower but supposed to be more secure. Except researchers at NCR Corp.told a recent Black Hat security conference that they’ve hacked those too. Time to go back to cash?

As for control, Hillary Clinton claims, “We know that Russian Intelligence services hacked into the DNC.” Uh huh. If the Russians were controlling our elections, wouldn’t Bernie Sanders have won the primary? Control is a real concern, especially when it comes to stock exchanges, power plants or nuclear launch codes. But these are, one hopes, the most guarded targets, with multilayered offline security.

Which brings us to cred. Many hackers hack just because they can. The “dark web,” basically hidden websites, and internet relay chat channels like Hackerfleet and OnionIRC light up with ideas and exploits and bragging rights. To me, these hacks, while they can be damaging, are like a Freedom of Information Act for the internet. We only know about Mrs. Clinton’s private email server, for instance, because Sidney Blumenthal’s AOL account was hacked in March 2013. AOL?

August 23, 2016

Is it time to bow to our robot overlords? Last week analysts at Morgan Stanley, using data from an Oxford University study, predicted that nearly half of U.S. jobs will be replaced by robots over the next two decades. Ouch. Maybe we should build a wall.

Cars that drive themselves? Waiters you don’t need to pay (or tip)? Self-folding clothes? Are we headed toward a post-job future? Signs are certainly there. Abundant Robotics, a company spun from the same Stanford Research Institute that brought us the mouse and networked computing, has begun testing a robot that picks apples. Red Delicious, not iPhones. Napa Valley vineyards are using vision systems to sort grapes.

According to a 2013 Stanford University study, some manufacturing robots now cost the equivalent of about $4 an hour—and they keep getting cheaper . . . and better. This month scientists at MIT have sampled a silicon chip-based LIDAR—light detection and ranging—like radar but much higher resolution, though it covers a shorter distance.

The Tesla Model S currently uses one radar sensor and one front-facing camera as vision for its Autopilot. Neither, sadly, picked out a white tractor trailer against a bright sky before a May 7 collision that killed a Tesla driver. LIDAR would. Current LIDAR can cost up to $70,000. The new chip? Maybe $10. At that price, they’ll probably be standard in every new car, “self-driving” or not.

And now we have thinking robots. Editors at the Associated Press claim robots write thousands of articles a year for them. So it’s over? The robots win? This certainly fits a certain world view for a bigger welfare state and universal basic income and other services to coddle displaced workers. See the May 26 Fortune magazine article “What Governments Can Do When Robots Take Our Jobs.”

But not so fast. The arena of prognostications is littered with the wrecked utopian dreams of leisure living—recall geodesic domes—and Skynet nightmares of roving robot armies. Both are bunk. Instead this is progress.

Technology always creates more jobs than it destroys. JFK worried how to “maintain full employment at a time when automation . . . is replacing men.” Employment was 55 million in 1962. It’s 144 million today. We’ve come a long way, baby.

This time will be no different. Steam engines destroyed jobs—OK, mostly for horse handlers—but enabled an explosion of manufactories, never imagined jobs and the Industrial Revolution. Cars killed trolleys but enabled hundreds of millions of new jobs. Vacuums and washing machines destroyed jobs for “domestic engineers” (though I will never admit to knowing how to operate either) but freed women to enter the much more productive paid workforce. Computers killed jobs for those with rulers and exacto knives who were laying out magazines or constructing physical spreadsheets. Now media and Wall Street don’t exist without Microsoft Office. In each case, technology augments humans, rather than replaces them.

Simply put, jobs that robots can replace are not good jobs in the first place. As humans, we climb up the rungs of drudgery—physically tasking or mind-numbing jobs—to jobs that use what got us to the top of the food chain, our brains.

July 09, 2016

The stormy Theranos saga took another turn late Thursday when the company announced that federal regulators were banning founder Elizabeth Holmes for two years from operating a blood-testing laboratory. The Centers for Medicare and Medicaid Services also pulled approval of the company’s California laboratory.

Theranos had already voided two years of results from its Edison blood-testing device. It is increasingly unclear whether the secretive company’s microfluidics technology, which required only a finger prick instead of a needle jab, ever actually worked.

I’m in no way surprised. After 25 years of tracking and investing in startups, I’ve learned that entrepreneurs will do anything to make their company successful: persuade, cajole and even put the fab in fabricate.

Entrepreneurs, it seems, all want to emulate the late Steve Jobs—even his fashion, given Ms. Holmes’s penchant for black mock turtlenecks. At Apple and Next and Pixar, Jobs emanated what became known as a “reality distortion field.” His overpowering charisma would convince workers, developers and investors to come around to his view of where the world was going.

There was only one Steve Jobs, but other entrepreneurs try their own Jedi mind tricks, attempting to use The Force to influence the weak. (In Silicon Valley, “Star Wars” is regarded as a documentary.) Sadly, the journey from charisma to coercion to lying is quick and often complete.

I’ve been lied to plenty. As an analyst, I once visited a still-prominent Silicon Valley CEO. His stock had taken a beating recently, but I liked the firm’s prospects and had come to evaluate the opportunity. He looked me in the eye and said, as I recall, “I don’t know why anyone would recommend our stock right now.” Then he unloaded all the things that were about to go wrong. Within two months, on better revenue, the stock had almost doubled. It turned out that when I had visited, the company was pricing options for the CEO and other executives. Had I recommended the stock, the exercise price might have been higher, eating into their take.

During the dot-com frenzy, I recall sitting through an initial public offering presentation for eToys.com. A chart of projected e-commerce spending overall showed quarter-by-quarter growth. But the graph with revenue for eToys itself inexplicably switched to six-month numbers. I passed on the deal; they were hiding something. No matter, the public got duped and in May 1999 the stock quadrupled on the first day of trading to a $7.8 billion valuation. The company would file for bankruptcy 22 months later.

June 25, 2016

When it comes to the homeless, Golden Gate progressives are morally stumped—now more than ever. Late last month two “transients,” as they have come to be called, went vigilante. The pair, nicknamed “Evil” and “Pizza Steve,” reportedly tortured and killed another homeless man, whom they believed had committed lewd acts in front of children. They dumped his body into Alvord Lake in Golden Gate Park.

The lake is more like a water feature at a mini-golf course, and it is a notorious hangout for San Francisco’s homeless. As I strolled around the area the other day, along with dog-walkers and stroller-moms in yoga pants, the smell of body odor and urine was uncomfortably high. Under a sign that read “Drug Free Zone,” a man accosted me: “Dude,” he said, “I’ve got some good green bud to show you.” I don’t think he meant the azaleas.

What hammers home the dilemma facing San Francisco progressives is the stark contrast between haves and have-nots. From the spot of the murder at the edge of the lake, you can see, at the base of Haight Street (the historic hippie hangout), a Whole Foods Market with organic papayas selling for $6.99 a pound.

Homelessness here is an old problem. Gavin Newsom, now California’s lieutenant governor, pledged to fix it when he successfully ran for mayor in 2003. Yet last year the city had 6,686 homeless, up from 6,248 in 2005, according to the city’s homeless census. Mr. Newsom passed a law making it illegal to sit on sidewalks during the day or sleep in parks at night, but it is rarely enforced.

“The city is becoming a shanty town,” warned Justin Keller, founder of the startup Commando.io, in a February open letter to current Mayor Ed Lee. “The wealthy working people have earned their right to live in the city. They went out, got an education, work hard, and earned it. I shouldn’t have to worry about being accosted.”

The San Francisco press disparagingly labeled Mr. Keller a “tech bro,” but Mayor Lee feels residents’ angst. “Neighborhood crime is up,” he admitted on May 31. “Homelessness is a visible and pressing concern.” Nothing, however, seems to work.

I’m sorry that I won’t be sucking up to you with the same old graduation platitudes. You should have invited Oprah: “How do you know when you’re doing something right? How do you know that? It feels so.” Or Michael Dell: “The key is to listen to your heart and let it carry you in the direction of your dreams.” Or Hillary Clinton: “Give it your all. Dare to be all you can be.”

Those are so vapid as to be meaningless—and you young’uns need real advice. So unscrunchie your man-buns, stop posting anonymous snark on YikYak, and listen up.

If you want to really change the world, get a P&L—as in, a profit and loss statement. Those of you I hear gagging in the humanities section are going to have to unlearn a few things. Harvard recently released a survey showing that over half of Americans ages 18 to 29 do not support capitalism. Ouch. You can almost feel the Bern.

Don’t be fooled. Capitalism is what allowed you to wander around this leafy campus for four years worrying about finals instead of foraging for food. It delivered the Greek yogurt to your cafeteria and assembled your Prius. The basic idea is to postpone consumption. Then invest in production to supply goods and services that delight customers. Next, generate profits. Rinse and repeat.

To succeed in life, to really improve the lot of your fellow man, you have to think about profits. I know, you’d rather clean a gas station restroom with your toothbrush. But profit is what drives change.

When I buy something from you (assuming you’re not a rent-seeking crony capitalist), your profit is how much I am willing to pay over what it costs to produce the item. In a truly competitive world, your profit is the value of my delight in your invention, or I’d simply make the thing myself. To put it in Facebook speak: Your profit is the social value of the transaction. Profits create wealth not only for you but for the collective “me” of society. Getting a P&L shines the light on that delight.

I spoke to a recent graduate who told me, with a straight face no less, that she aimed to be half Sheryl Sandberg’s “Lean In” and half Tim Ferriss’s “4-Hour Workweek.” I told her to get a P&L instead, to try to understand the economics of whatever she chose to do. She leaned out, mumbling “greedy.”

April 30, 2016

In this city’s crowded financial district you’ll find a Wells Fargo Bank branch with an antique stagecoach inside. But I was interested in talking with a former Wells Fargo employee, so I headed elsewhere, to SoFi, a “fintech”—financial technology—company doing its best to turn the banking system upside down. I wound my way out to the Presidio, a former military base now commercialized, with beautiful views of the Golden Gate Bridge, Alcatraz and, if you peer through the fog, the future.

Once inside SoFi’s modern, open-floor-plan headquarters, I meet the CEO, chairman and co-founder, Mike Cagney, sitting at a table in a gray company T-shirt and jeans. The 45-year-old native Californian speaks in a deep, deliberate voice, with an undercurrent of confidence and excitement. What’s he so confident and excited about? Doing to banks, with a smartphone-based model, what Amazon has done to book stores and Uber has done to taxi fleets. “There is going to be a seismic redistribution of market cap in the banking world,” he says. “They won’t see it coming until it’s done.”

Much of America wasn’t sure what it was seeing when SoFi aired a dreamy “Great loans for great people” Super Bowl ad this year. But the high-profile TV spot, in the telecast’s tradition, stuck a flag in the ground for a young company with big dreams. The question is whether SoFi will turn out to be more Apple Inc. or more Pets.com.

What started out as an ingenious little enterprise making gold-plated student loans at the Stanford Graduate School of Business a few years ago has since expanded to student loans more generally and added mortgages, personal loans and wealth management. Mr. Cagney says SoFi has done 150,000 loans totaling $10 billion and is currently at a $1 billion monthly loan-origination rate.

How did he get here? The aspiring big-bank slayer grew up as a surfer in Southern California. He says he qualified for schools with better reputations, but his priority was better waves so he enrolled at the University of California, Santa Cruz (home of the Fighting Banana Slugs), and got a degree in applied economics. He also taught himself to code. In 1994 he took a traditional route, a job at a bank—at Wells Fargo, managing credit exposure to risk. “We would sell a credit swap to a XYZ and then lay it off to J.P. Morgan,” he says.

The young banker suggested that the bank could make a lot more if it kept the risk in-house. But the technology was ancient—Fortran and Cobol and IBM 3270 terminals—so he was tasked with a one-year project to set up a modern system. “I went in with my wife over a weekend and rewrote the whole thing and deployed it.” The bank made tons of money trading derivatives, he recalls, but as everyone on Wall Street knows, you get paid at investment banks, not commercial banks, so the really good people leave.

Mr. Cagney left in 2000 to start a wealth-management software company—not the greatest timing, as the dot-com bubble burst. He named it Finaplex—not the greatest name, as it turned out also to be the name of a popular growth hormone. Finaplex was sold in 2007 and Mr. Cagney decided to raise money to start trading again. Everyone told him he had been away from the market too long, but he thought “it’s the same market,” and dived in.

“One of the most important characteristics of an entrepreneur is you should be obtuse enough not to listen to everyone telling you that you can’t do something,” Mr. Cagney says, “but not so obtuse that you try to make flying cars.”

April 27, 2016

The bids to buy Yahoo’s operating business, rumored to be between $4 billion and $8 billion, are in—and my guess is that they are all high. Think back to 2008, when Yahoo turned down a $44.6 billion hostile bid by Microsoft, which wanted control of a very robust online business combining search, finance and sports.

Boy, did those Microsoft guys dodge a bullet. Eight years later, Yahoo is for sale, with Verizon and a few private-equity companies picking at the carcass. The company’s current $35 billion value is all about its holdings in Alibaba and Yahoo Japan. And Yahoo’s core Web business, the part that’s for sale? In my opinion, it’s worth virtually nothing.

How can that be? Last year the company did about $1 billion a quarter in net revenue, and more or less broke even. But revenue for the first quarter of 2016, reported last week, is down 11%. About $240 million of Yahoo’s annual revenue, according to Re/Code, comes from licenses and fees paid by Yahoo Japan, which may dwindle in 2017. In the tech world, if you’re not growing, you’re dying.

Under CEO Marissa Mayer, Yahoo has tried everything to jump-start growth. She bought the blogging site Tumblr in 2013 for $1.1 billion in cash. At the time, Tumblr had a meager $13 million annual revenue. Early this year, Yahoo wrote down $230 million of Tumblr’s value. There’s probably more to come. Suffice to say, the deal has been a huge flop.

The company has also thrown money into media—Yahoo Global News Anchor Katie Couric in your browser! She reportedly generated 150 million streams last year. Not bad. Yet the “Today” show gets about 25 million viewers a week. Google does 3.5 billion searches a day.

The rest of Yahoo? Its legacy business of search and display ads is dragging the company down. By now, it ought to have a robust mobile business. But can you think of any must-have app from Yahoo? Of the top 100 free apps in Apple’s store when I checked this week, it had just one: Yahoo Mail. It was No. 96.

March 10, 2016

Who’s the world’s worst investor in the past 18 months? Look no further than Russian President Vladimir Putin. He has been long and wrong with a giant energy portfolio and controls too many commodities. Plus he has tons of debt and a currency bet that has gone so bad his nickname should be Vlad the Impaler. And he may take down the Russian Federation with him.

Oil has cratered so badly that it needed a modest bump in the past couple of weeks to get its nose above $38 a barrel, still way down from $50 a year ago and $105 in June 2014. A slip back into the 20s is entirely possible. Energy is almost a quarter of Russian GDP. The Russian state owns three-quarters of the oil company Rosneft (40% of Russian oil output) and just over half of natural-gas producer Gazprom. The company is now worth under $50 billion, about half its value 18 months ago and down almost 85% since June 2008, when Gazprom was worth $344 billion, according to the Financial Times. By contrast, Exxon is down 24% over that period.

The Russian ruble has been falling like a sack of potatoes. It is 71 to the dollar, down from 34 in mid-2014—doubling the price of imports. When the ruble lost value in late 2014, the government intervened in currency markets, selling dollars from their reserves and raising interest rates to 17%. The ruble rose to 50 to the dollar, but after blowing through over $80 billion in foreign currency to stabilize its own, the government stopped protecting the ruble. This led to the current free fall. Interest rates are now 11%, but according to the Central Bank of Russia, inflation last quarter was 12.9%.

There is some good or at least not-bad news. According to the Central Bank, as of January 2016, Russia’s external debt, money owed to creditors outside of Russia, was $515 billion. Down from $733 billion in mid-2014, it is moving in the right direction. And perhaps only 20% to 25% of that debt is current, meaning payable in 2016. Government foreign reserves as of January 2016 were $371 billion, with $51 billion in gold. They’ve been chewing through these reserves over the past two years, but if they lay off currency trades, on paper it looks like they’ll survive.

But Central Bank data also show that 83% of Russian debt is denominated in dollars or euros. Every day the ruble drops in value, the debt owed goes up. This hurt Russia and Asia in the late 1990s, but the former didn’t learn.

February 02, 2016

China sneezed and the world caught double pneumonia. So far in 2016, oil prices and global markets have taken a pounding as China’s economy slows. The Dow is down 6%, and the Shanghai Composite lost 24% in January. Plus, the yuan has plummeted to a five-year low. And now Donald Trump wants to whack Chinese exports with a 45% tariff. Is the Great Boom of China finally ending?

There’s certainly evidence to say yes: The Shanghai stock index is down 48% from its June peak. The World Bank recently cut its forecast for China GDP growth to less than 7%, the lowest since 1990. Corruption is rampant and the authoritarian instinct to shut down markets when they falter has spooked investors.

Meanwhile, the global commodity-price bloodbath—with oil at $32 a barrel—has been blamed on China’s slowdown. The recently reached Trans-Pacific Partnership trade agreement excludes China, with President Obama saying last fall that “we can’t let countries like China write the rules of the global economy.”

Ugly, for sure. But savvy investors see turbulence and search for waves they can surf to success. Look closely and it’s clear that China’s economy of 1.4 billion people is undergoing a seismic shift—from top-down infrastructure investment to a more consumer-driven economy, moving from concrete to cars, cellphones and other consumer goods enjoyed by developed economies. Over the next several years, investors would be wise to focus on Chinese consumers buying goods and especially services (insurance, car rides, vacations).

You have to go back to the Asian currency crisis of 1997-98 to understand today’s slowdown. China’s leaders knew they had to continue modernizing; even simple things like roads and sewer systems were still lacking. They had watched neighbors South Korea and Thailand and Malaysia go under and crash their currencies trying to pay back massive dollar-denominated debt used to upgrade their own infrastructure. So instead of borrowing from abroad, China’s leaders encouraged workers to emphasize saving over shopping, which helped build more housing, highways, airports and trains.

Sure enough, China’s savings rate rose from 32% of GDP in 1980 to 50% today. Investment followed a similar trend. Household consumption dropped from 70% of GDP in 1962 to 50% in 1980 to around 35% today (it is 70% in the U.S.). That’s how you self-fund a build-out.

And it worked. According to Canadian analyst Vaclav Smil, China churned out more concrete in three years (2011-14) than the U.S. did in the entire 20th century. Aging Hutong residences are disappearing, replaced by 50-story high-rise apartments—many of which stand empty. To fund all this, China is 106th globally in household consumption at $3,900 per capita, behind Swaziland but ahead of Algeria—and about 10% of the figure for the U.S.

Chinese leaders are trying desperately to steer spending in a new direction, but it isn’t easy to turn a $10 trillion economy on a dime. Yet there are ways to change course, hopefully without blowing up the global economy.

The first step is crack down on corruption, which would help slow down infrastructure spending. Make it harder to keep building four-lane highways to places no one visits. This process has already begun. Banks are being told not to continue funding dead-end projects. Since 2012, according to the China Daily, some 270,000 officials have been charged with corrupt activities—even a member of the Politburo Standing Committee, a position akin to the president’s cabinet.

December 29, 2015

On Dec. 29, 1959, the physicistRichard Feynmandelivered a famous speech at the California Institute of Technology titled “There is Plenty of Room at the Bottom.” He predicted almost limitless possibilities if we could “manipulate and control things on a small scale.” He nailed the next five decades of ever-shrinking realms that ultimately produced trillion-dollar markets in microelectronics, nanotechnology and bioengineering through DNA-level manipulation.

Now what? We’re 16 years into the 21st century without any clear map of the world ahead. Social media is nice—my friends take really glamorous vacations—but it doesn’t compare with opening Uber on my iPhone and, in what seems like seconds, hailing an imposing metallic Cadillac Escalade, which pulls up next to me. What else can I click on and change the real world?

The answer: The smaller technology shrinks, the bigger the world can grow. Smaller transistors, faster processors, cheaper sensors will all allow innovators to tackle problems with tremendous precision. It’s as if, because there is plenty of room at the bottom, now there is plenty of room at the top.

Do I mean self-driving Ford Mustangs? Certainly. I often see Google’s self-driving cars on the highways around the Bay Area in California. The $70,000 LIDAR vision system installed in the car is about to drop to less $1,000, cheaper than air bags. But the upside is much more than that.

For one, there is longer and higher. The new $6.4 billion Bay Bridge span, designed and simulated withAutodesksoftware before a single crane was deployed, is equipped with 199 seismic sensors to check for damage after any earthquake. The 2,073-foot Shanghai Tower, set to open any day now, has 400 real-time monitoring sensors, 27 wind-pressure sensors and 40 inclinometers looking for structural sway at different heights. Next-generation bridges will certainly install thousands, even millions of sensors. The result? Structures that are both safer and can scale to sizes not yet imaginable.

Building design and construction haven’t advanced much since the Empire State Building was raised in the 1930s. That’s changing, and here’s one example: Window struts, which are designed to resist compression, can be dashed off a 3-D printer. And because you can do amazing things in 3-D design, the printed version is 10 times lighter than one manufactured in a factory. And perhaps even 10 times stronger. So why doesn’t everyone use it? Because it costs 10 times as much and takes longer to churn out. But it’s only 2015: The cost will drop, and the entire construction industry will be turned downside up.

November 19, 2015

The beauty of the stock market is that no one can tell you where to put your money—until now. Last month the Obama administration’s Labor Department issued Interpretive Bulletin 2015-01, which tells pension funds what factors to use when choosing investments, including climate change. Only a few tax lawyers noticed, but with U.S. pensions at $9 trillion, this is a gross power grab that will hurt the retirees it claims to protect.

In 2008 Labor issued guidance for parts of the Employee Retirement Income Security Act of 1974, affectionately known as Erisa, that environmental, social and government factors—for instance, climate change—may affect the value of investments.

Most pension fund managers, who have a fiduciary responsibility to maximize returns, have assumed that such factors can act as a tie breaker, if all other things are equal. The thinking was: Thanks for the heads up about the climate, but leave the investing to us. Managers could still weigh other factors above climate change without getting sued.

No more. According to the Oct. 26 bulletin from Labor: “Environmental, social and governance issues may have a direct relationship to the economic value of the plan’s investment. In these instances, such issues are not merely collateral considerations or tiebreakers, but rather are proper components of the fiduciary’s primary analysis of the economic merits of competing investment choices.”

The word “primary” is the rub. Investing is hard, as anyone who has bought a stock only to watch it crater 20% a week later knows. There are thousands of factors that influence daily stock prices—product, profits, management, competition, interest rates, global unrest, government interference, technology and so on.

You may have an opinion on climate change, I may have another. If it were settled science, would we need marching orders from Labor? Al Gore invests using his thesis on sustainable capitalism, and good for him. Just don’t force that on the rest of us.

November 11, 2015

Imagine my surprise when I learned that my son, freshly out of college and applying for a car loan, enjoys a higher credit rating than I do, despite my 35 years of never missing a credit card or mortgage payment. One car dealer explained that my son had a pristine status simply because he’d never borrowed.

Whether out of embarrassment, confusion or curiosity, I decided to look into the rating, known as the FICO score, which is pulled for nearly all consumer lending—90% of credit checks, 10 billion times a year. Yet the more I dug, the more I uncovered vague if not manipulative practices. Remember how three credit-rating firms stamped bogus AAAs on subprime mortgages, leading to the financial crisis in 2008? The similarities are eerie.

FICO is software from the Fair Isaac Corp., which bills itself as a “predictive analytics and decision management company.” Started in 1956, Fair Issac began licensing its code in 1989 to the three national credit-rating firms, Experian, TransUnion and Equifax, to produce scores ranging from 300-850. The formula is secret, the Kentucky Fried Chicken recipe of lending.

We know a little about what goes into a credit score: unequal parts payment history, amount owed, length of history, types of credit. FICO doesn’t care whether you pay your rent, utilities and cellphone bill, or save for a down payment on a house. A sample model floating around suggests that points are added for a long payment history, which makes sense, but deducted for having too many credit checks performed or, oddly, paying your credit card bill in full each month rather than underpaying and carrying a balance.

Plenty of tips to improve your FICO score are available, including reporting your credit card as stolen so that when you get a new one, you’ll have two credit cards with long payment histories. I doubt that works.

Want to know your FICO score? Good luck. Thousands of websites offer free credit scores, but they’re inaccurate estimates affectionately known as FAKO scores. Most have disclaimers. Many, such as Truecredit.com, are owned by the same credit agencies that calculate your score for banks or mortgage lenders. The websites often require signing up for an alert service at $29 or $39 a month. By the way, perusing these sites will flood your browser with ads from credit agencies.

The only place to find your true score is myFICO.com, owned by Fair Isaac. It comes with the following note in tiny font: “Your subscription will automatically renew at $29.95 unless you cancel.” Et tu, FICO?

September 11, 2015

On page five of Donald Trump’s 1987 book “Trump: The Art of the Deal,” he says: “Sometimes it pays to be a little wild.” Apparently people believed advice like that could make them rich—the book sold more than a million copies. But as The Donald climbs to dizzying heights in presidential polls, it’s a good time to take a look at the real—and decidedly non-wild—secrets of his success. Behold Trumponomics in 10 easy steps.

1. Be born rich. Mr. Trump’s father, Fred C. Trump, built a real-estate empire after World War II and in 1999 left an estimated $250 million estate. One of hissuccess secrets was taking advantage of Federal Housing Administration financing to build cheap houses in Brooklyn and Queens. The golden government apple didn’t fall far from the tree.

2. Own politicians. In 1974 at age 28, Mr. Trump officially took over the family business, the Trump Organization. His father was a buddy of a guy named Abe Beame, who ended up mayor of New York in the mid-1970s. That proved good for the Trump bottom line.

In the 1980s Donald Trump bankrolled people campaigning for seats on the New York City Board of Estimate. Surprise: The board decided land-use matters. Mr. Trump is one of the top political donors in New York state, according to the New York Public Interest Research Group, and Democratic Gov. Andrew Cuomo, who received $64,000, is one happy recipient. Mr. Trump said in a July interview that “when you give, they do whatever the hell you want them to do. As a businessman, I need that.” As the saying goes, an honest politician is one who, when he is bought, will stay bought.

3. Get tax breaks. Mr. Trump’s first big real-estate win in the 1970s was converting New York’s old Commodore Hotel into a Grand Hyatt. His dad’s friend Mayor Beame kindly extended a 40-year tax abatement worth $60 million in its first decade. In 2011 Mr. Trump told the Los Angeles Times that someone had once asked him how he had finagled a 40-year abatement, and Mr. Trump said he replied: “Because I didn’t ask for 50.”

Trump Tower on Fifth Avenue has enjoyed a $164 million property-tax exemption good through next year. But someone must pay taxes, and oh, that’s right, New York is ranked No. 1 for worst taxes, with an average burden of $9,718—almost 40% more than the national average, according to an analysis by WalletHub.

4. Monetize ad diction. Here’s where it gets tricky. Protected cash flow from apartments and office space is nice, and the Trump name attracts tenants willing to blow cash. But there must be another way to extract money from people. Fortunately, gambling became legal in New Jersey in 1976. Voilà: Harrah’s at Trump Plaza opened in 1984 and quickly shortened its name to Trump Plaza (hey, it was the ’80s, and the name said classy to high rollers). The casino closed last year. Gambling is a tax on people who don’t understand statistics. The Donald must have earned high marks in stats 101 at Wharton.

5. Go in debt up to our eyeballs.Another gem from “The Art of the Deal”: Most people “think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage.” Mr. Trump’s third Atlantic City casino, the 17-acre Trump Taj Mahal, opened in 1990. But Mr. Trump loaded up $3 billion in debt from an expensive takeover, construction and cost overruns. Which brings us to . . .

August 25, 2015

Hillary Clinton’s big economic idea—ending corporate “short-termism,” as she calls it—will do more harm than good. On the campaign trail she rails against American corporations and the mysterious “tyranny of today’s earnings report.” Her solution is to raise capital-gains taxes and lengthen stockholding periods. Imagine anxiously waiting to unload during this month’s global selloff because of a holding period. Chalk it up as another misguided effort that will distort the information investors and companies rely on to make good decisions.

Markets run on signals. What could have been a housing downturn melted into the 2008 financial crisis in part due to lack of trading of mortgage derivatives in 2006-07. The prices didn’t reflect underlying value; it’s buying and selling of shares in the stock market that provides signals, to investors and to management, about the value of enterprises. Anything that mucks up those signals will be disastrous for decision making and the productive fabric of the economy.

Less trading means less information. Russia’s old stock exchange shut down amid the revolution in 1917 and eventually became a naval museum. Soviet planners embarked on five-year plan after five-year plan with no price signals. That experiment eventually failed. The Chinese are about to unveil their 13th Five-Year Plan. None of the previous plans highlighted Alibaba and the importance of online commerce. That’s because progress happens by surprise, not government planning. Investors need report cards to judge progress, and thus there’s quarterly disclosure.

But whether an investor is trading or putting a stock certificate in a safe-deposit box, stock markets facilitate access to capital. Part of that process is moving stock into the hands of those who desire a certain risk profile. Some, such as pension funds and Warren Buffett, like the steady cash flow of consumer and industrial giants. Others prefer lily pad investing, jumping from one hot idea to the next. Which is better for the economy? Neither. Both are important and healthy.

Despite harassment by shareholder activists, Apple increased research and development spending 40% this year over 2014, to almost $2 billion a quarter. Now that’s long-term investing. If activist investor Carl Icahn couldn’t change Apple CEO Tim Cook’s mind, why would higher capital gains taxes? On the other hand, paid television stocks are suffering this summer for not investing for a digital future. This is starting to show up in missed earnings. Maybe they’d like a decade or so to work things out without reporting earnings? Instead the market punishes them and reallocates capital to companies doing things right— Netflix and Facebook, for instance.

July 10, 2015

The latest bubble chatter in the tech industry came from Fitbit, the maker of high-tech pedometers. Fitbit went public last month at a $4.1 billion valuation, and the stock price has more than doubled. Is a company that made $132 million in profit last year worth almost $9 billion? Major Silicon Valley players don’t think so. Sam Altman, who runs the startup accelerator Y Combinator, called the market last month a “mega bubble” that “won’t last forever.”

But since fewer startups seem willing to submit themselves to the disclosure and discipline of the public markets, how would we know? The Wall Street Journal’s Billion Dollar Startup Club shows 100 private companies valued at more than $1 billion. Yet this year there have been only eight venture-capital-backed initial public offerings compared with 115 in all of 2014.

Aside from Tesla and a few others, most of the hot companies with eyebrow-raising values are staying private. Uber is rumored to be raising $2 billion in funding for a valuation of $50 billion. Blue Apron, which ships three million meal kits a month to hungry millennials, has taken in $135 million at a $2 billion valuation. Food-delivery companies Instacart and Delivery Hero are worth a few billion each.

Yet none is going public. The delay can perhaps be blamed in part on Sarbanes-Oxley, a 2002 law that beefed up oversight and made it more expensive to be a public company. There’s also the 2012 JOBS Act, which increased the threshold for public reporting to 2,000 shareholders from 500. Whatever the causes, there is no longer a rush to go public if companies can raise sufficient private capital. “Now, after the IPO, it’s much worse,” Alibaba co-founder Jack Ma put it in June. “If I had another life, I would keep my company private.”

As a shareholder and a lifelong bubble watcher, I’m disturbed. Public markets enforce discipline on companies and push them to improve. Look at Facebook. In the first full quarter after its 2012 IPO, the company disappointed Wall Street with only 14% of revenue from mobile—phones, iPads and other portable devices. Now mobile accounts for 98% of Facebook’s ad growth and almost 70% of its revenue. Markets rule.

June 25, 2015

The Ford Foundation vows to fight inequality but will have a hard time beating Henry’s example.

On June 11, the $11 billion Ford Foundation announced that it will pour its resources—about $500 million in giving a year—into fighting inequality. “We are talking about inequality in all its forms—in influence, access, agency, resources, and respect,” Darren Walker,the charity’s president, wrote in a letter.

Oh, the irony. I won’t join the public intellectuals having hissy fits over how people choose to give away their money, beyond being annoyed that since the Ford Foundation is tax-exempt, we’re all subsidizing it. Here’s the real problem: The foundation is getting exactly backward what its namesake, Henry Ford, understood. Society benefits from making, not giving.

The bulk of the Ford Foundation’s assets came when it received 88% of the nonvoting shares in the Ford Motor Company, most after Henry Ford died in 1947. Ford hated inheritance taxes, then a punitive 70%. In 1956 Ford Motor went public at $3.2 billion. Most of the shares sold were from the Ford Foundation, about a quarter of its holdings. The foundation’s charter stated the money should go “for scientific, educational and charitable purposes, all for the public welfare.” How times have changed.

This story matters because people have lost sight of where foundations got the money they’re donating. Ford Motor was worth $3 billion 60 years ago because it was profitable and investors had high expectations, not because the company raised wages to $5 a day, a popular myth. Ford Motor was profitable because Henry Ford created scalable assembly lines, reduced the cost of the Model T to under $300, and sold 15 million of them.

Model Ts made millions of businesses and workers more productive and created that “public welfare” that the Ford Foundation struggles to achieve. Ford Motor created wealth for society, as well as for Henry Ford, and you can’t do the latter without the former.

Think about it: No one would invest $300 in a Ford unless he thought that he could make at least that much using it—to deliver milk, to get to work, whatever. At least 15 million drivers made that choice, and the rest of Americans benefited from cheaper milk and Corn Flakes. In other words, the Ford Motor company increased living standards, and as a result its owner became fabulously wealthy. This may have increased the perception of inequality, yet everyone was better off.

A company’s profits are the minimum value of the work it does for you and for society.